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Written by ZOOZ consulting and training | (972)-9-9585085 | info@zooz.co.il | www.zooz.co.il

| Issue 73 |


Hello!

We are pleased to send you the new issue of LaZOOZ.
This monthly newsletter is sent as a free service to thousands of senior executives.
It features different sections each time, and does not include advertisements.

 

We have tried to keep it brief, knowing that your time is precious and your work is plentiful. Those who wish to learn more can find links to articles and sources of relevant information. We hope that you will find the newsletter useful. We would be happy to receive any comments and suggestions.


Pleasant reading!
Ari Manor, CEO, ZOOZ



Focus

On strategic development in practice

Strategic Pricing – How to Match Pricing to Strategy

The first part of an article that was published in the 244 edition of Status – The Management Perspective Magazine

 

Is pricing a tactical or strategic issue? Who should dictate the pricing of your products and services? How do you know what the right pricing is for your business and marketing strategy? What pricing will let you to grow and increase your revenues in your market? This article will attempt to answer these questions, while focusing on the strategic aspects, and on matching the pricing to your strategy.

 

?Pricing – Tactic or Strategy

 

Pricing has tactical aspects, especially if it is specific pricing, such as negotiations with a large customer, a price quote as part of a tender for service provision, or a sales promotion of a shelf product. There are tactical pricing principles that you should employ in these cases.

 

For example, prior to negotiations with a large customer, you should determine in advance the lowest price (based on the minimal cost and profit that will suit us), the highest price (based on market prices, above which the customer will refuse to buy), and an intermediate price that we can aspire to (based on the profit and the positioning we wish to attain – as a company providing either cheap, intermediate, or expensive solutions). During the actual negotiations, you should start with the highest price, which is above our target price in any case, and if necessary – lower the price in increasingly smaller increments, to indicate to the customer that we are reaching our lowest possible price.

 

There are also similar tactical principles for pricing quotes as part of tenders, and to pricing sales promotions. For example – with certain tenders, it is recommended to offer the customer a range of discounts according to future purchase volumes. Details about successful pricing for Gilat’s antennas using this method appear on page 53 of the book Ekdah Bekrav Sakinim (Gun in a Knife Fight) by Yoel Gat. With certain sales promotions, it is standard practice to raise prices one month before the sale. For example – raising the price of books one month before the annual Book Week sales.

 

Strategic pricing is a key to competitiveness

 

So, there are tactical aspects to pricing, and tactical principles for specific pricing. However, on a macro-scale, pricing also has a decisive strategic effect. Pricing is one of the 4P’s of the marketing mix (product, price, position, promotion), and it is therefore a cornerstone of the marketing strategy. Pricing indicates to customers our positioning in the market in relation to the competitors (for example – basic, premium, super premium). The pricing we choose must match our business strategy (in other words – our market, and what products / services we will offer). For example – a company that offers subcontracting services must offer competitive prices to its customers, who will undoubtedly compare with other suppliers.

 

Later in the article, we will focus on the question of how to match pricing to strategy. In other words, according to what strategic principles must we price all the company’s products and services. This is an important question. The CEO and the Marketing Manager are meant to have their say, to answer this question, and to dictate to the entire organization the strategic principles for appropriate pricing.

 

For the rest of the article – click here.

 

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Futurism

Innovation ideas not yet realized

Ideas for innovations in computer mice

 
The following ideas were developed using various thinking tools, and do not exist at present (to the best of our knowledge):

  1. A mouse that vacuums the dust from the desk and keyboard
  2. A optic mouse with a built-in GPS, that also works on a smooth white surface
  3. A kinetic wireless mouse that automatically recharges when you move it
  4. A mouse that doubles as a thermometer (when you hold it in your hand)
  5. A mouse with a vibrate mechanism, that massages our hand while we work, and prevents wrist pain
  6. A mouse with a built-in nail clipper
  7.  A mouse with a built-in extendable utility knife that can be used to cut paper and cardboard
  8. A trolley that has a built in GPS that can link up with a phone app to show its location (makes it possible to locate, and also prevents theft)
  9. Two mice that connect to one computer (for two-player games)
  10.  A mouse with an odometer that shows how hard our (mouse) hand has been working (and maybe even suggests taking breaks)
  11. A telescopic or inflatable mouse that can be made larger or smaller according to the size of our hand
  12. A mouse with a pre-defined signature as a security measure (the computer only starts working once we sign our signature with the mouse).
  13. A mouse that exclusively turns our computer on, which we carry in our pocket when we are away from the computer
 

 

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Efficiency

A tip on effective management

How can we measure sensitivity to price?


In continuation to the Focus column in the first part of this newsletter, I will describe a practical way to measure our customers’ sensitivity to the price of a product or service.

 

To do this, you must prepare a Concept Questionnaire based on the product you want to offer and the pricing you are interested in checking. Instructions for completing a Concept Test have previously been described in past issues of this newsletter:
The Concept | The Questionnaire | performing and testing

 

This time, instead of conducting a complete concept test and asking numerous questions, ask only one regarding the cost versus benefit. For example – “In your opinion, how reasonable is the price of the product compared to the benefit it provides?” The answer will be on the following scale: 5 Extremely reasonable, 4 Very reasonable, 3 Reasonable, 2 Unreasonable, 1 Very unreasonable.

 

You should also ask questions about the responder’s personal details: age, sex, education, income level, and similar questions that are important to you. You must ask at least 20 potential customers, and aim for them to be a representative sample (sex, age, sector, etc.). Since the questionnaire is very brief, it won’t be difficult for you to get answers.

 

Organize your results in a table, and calculate the average. If the average is around 5 – you should raise the price (if no one is complaining about the price, it’s a sign that it is too low…). If the average is around 4 – the price is just fine. And if the average is around 3 or lower, you should lower the price. Of course, it’s important to analyze the answers according to the responders’ personal characteristics.

 

If you have decided to change the price, you can check whether it is a good idea using a new questionnaire that will be identical to the previous one, except for the changed price. Ask 20 or more different potential customers, and see if this time the results average at around 4. If so, you have reached the optimal price. Good luck!

 

 

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Published by ZOOZ | +972-9-9585085 | info@zooz.co.il | www.zooz.co.il

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